GMR Infrastructure

Dear Shareholders,
 
 The last fiscal has seen an economic cataclysm, not witnessed in
 several decades. The credit crisis in the U.S. has triggered an
 economic recession with global ramifications characterised by liquidity
 crunch, instability of key businesses, mounting fiscal deficit and
 decline in consumer wealth and economic activity.  Consequentially,
 every sector of the economy including real estate, aviation,
 hospitality, infrastructure to name a few, has been adversely impacted.
 
 We however share the optimism of India’s billion plus populace that is
 buoyed by a stable and strong political leadership at the centre
 committed to reforms; a renewed thrust on infrastructure sector and
 signs of global economic recovery.
 
 We continue to operate with the underlying conviction that every
 challenge presents a unique opportunity. The economic contagion has
 reinvigorated our focus on achieving performance excellence through
 elimination of wastage and unproductive practices.
 
 Towards this objective, we have introduced the “Value for Money” (VFM)
 initiatives across the organisation – seeking to achieve the highest
 order of efficiencies in processes and excellence in execution. To this
 effect, we have decided to review the short term growth plans of all
 our businesses to align our strategy with market realities.
 
 Our business model is based on enduring relationships with our partners
 and diverse stakeholders. Our success in garnering funds for projects
 through banks and other financial institutions demonstrates the faith
 reposed by our stakeholders in us. This has enabled us to achieve
 significant project milestones in the previous year, despite the global
 meltdown.
 
 Business Developments and Financials
 
 Our vision to give Delhi a world-class airport received a leg up with
 the inauguration of the new domestic departure terminal (T1D) on
 February 26, 2009. Earlier, on August 21, 2008, the third runway was
 inaugurated at the Indira Gandhi International Airport (IGIA). The
 Delhi International Airport Private Limited (DIAL) also successfully
 completed the modernisation of the existing international terminal at
 IGIA in June, 2008.
 
 During this period, we leased out plots for commercial property
 development at the IGIA. It was heartening to note that DIAL received
 60 bids for the development of the hospitality district despite the
 current economic depression. This reflects the value potential and
 economic opportunity offered by the Aero-city project. The construction
 of the new integrated terminal at IGIA, Terminal 3 (T3), is proceeding
 in full swing to meet the launch deadline in 2010. We are confident
 that T3 will meet the high expectations of all our stakeholders.
 
 Rajiv Gandhi International Airport (RGIA) at Hyderabad has also
 completed one year of successful operations.
 
 Our energy business continued to fuel our growth. GMR Power Corporation
 Private Limited successfully completed a decade of operations achieving
 its best ever performance in terms of plant load factor and heat rate.
 GMR Energy Limited (GEL) performed successful merchant operations since
 November 2008 while the Vemagiri Power Generation Limited (VPGL)
 resumed operations in December 2008. We also won the license for power
 trading and have traded approximately 630 Mn units of power during the
 year.  Additionally, in the current fiscal, the 1050 MW Kamalanga
 Thermal Power Project in the Dhenkanal district of Orissa has achieved
 financial closure. The funding for this Rs. 4,540 Crore project is
 being met through a combination of debt and equity in the ratio of 3:1.
 Debt of Rs. 3,405 Crore has been tied up with 13 banks to fund Rs. 4540
 Crore project. The project is scheduled to commence commercial
 operations by 2012. It has also secured coal supply for the entire
 capacity via a tapering linkage and coal block allocation from Rampia
 and Dip Side Rampia coal block in Orissa. The coal block would be
 developed simultaneously.
 
 Further, we are engaged in the development of the thermal power project
 in Chhattisgarh and the hydel projects in Uttaranchal, Himachal Pradesh
 and Nepal. In order to secure fuel supply, we have acquired a 100%
 stake in the Indonesian coal mine PT Barasentosa Lestari, having mine
 life of approximately 25 years.  Additionally, the Group has acquired
 33.34% stake in Homeland Energy Group (HEG). HEG through its
 subsidiaries in South Africa owns controlling interests in the Kendel
 mines, an operating resource besides the Eloff mines and other
 exploration areas with total minable reserves of 300 Mn MT.
 
 The economic slowdown not withstanding, we continued to expand our
 asset base in the Highways business. We have also completed three
 highway projects – 35 Km stretch between Ambala and Chandigarh, 103 Km
 stretch on NH-7 between Adloor Yellareddy and Gundla Pochanpalli, and
 58 Km stretch on NH7 between Thondapalli and Jadcherla. The 73 Km
 between Tindivanam and Ulundurpet on NH45 is slated to begin operations
 shortly. We have won the 181 Km Hyderabad – Vijayawada highway (NH9)
 project from NHAI at an estimated cost of Rs. 2,200 Crore and the 29.65
 Km Chennai Outer Ring Road Project from the State Government at an
 estimated cost of Rs. 1,100 Crore. Going forward, we will actively
 participate in the National Highway Development Programme and select
 state road projects in an endeavour to maintain a sustainable and
 robust portfolio that offers significant value to all stakeholders.
 
 We are actively expanding our presence in the global marketplace
 through our International Business Division (IBD), GMR International,
 headquartered in London. During the last fiscal year we took over the
 operations of the Sabiha Gokcen International Airport, Istanbul, Turkey
 in May 2008. The construction of new passenger terminal and related
 facilities at the airport has commenced and the project is scheduled
 for completion on October 29, 2009.  Once completed, the airport will
 be spread over 1.9 Mn sq. ft.  covered space and will be equipped with
 all the modern amenities including additional facilities such as the
 hotels, viaduct, apron and car parking.
 
 Our Group acquired 50% stake in InterGen N.V., a leading global power
 generation company on October 9, 2008. InterGen has approximately 7700
 MW of installed capacity spread across four continents and is in the
 process of developing various other power projects aggregating to
 approximately 2800 MW capacity. For our landmark achievement under
 testing economic conditions, we won the Infrastructure Acquisition of
 the Year award by Infrastructure Journal. GMR International has also
 acquired 100% stake in the Island Power project, Singapore in May 2009.
 On completion, the gas based project will have a capacity of 800 MW.
 
 We have made significant strides in our SEZ business. The 3300 acre
 Krishnagiri SEZ, Tamil Nadu, located on NH7, is focused on sunrise
 sectors such as solar and Photo Voltaic, along with other sectors such
 as biotechnology, IT and ITES. In Hyderabad, we have plans to develop
 250 acre aviation SEZ, where we aspire to develop the first aviation
 cluster of India. This would serve as the hub of aviation related
 activities such as MROs, aviation academy, etc. We have signed
 agreements with MAS Aerospace Engineering (MAE), a wholly owned
 subsidiary of Malaysia Airlines, for setting up Maintenance, Repairs &
 Overhaul (MRO) facility at RGIA. Additionally we have also inked an
 agreement with CFM International for developing a maintenance training
 facility.  Another multi-product SEZ spanning 250 acres is proposed to
 be developed into a logistic hub.
 
 The company is presently engaged in completing various ground works for
 airport-led commercial property development at RGIA and IGIA. DIAL is
 developing an integrated hospitality district on the piece of land
 adjoining IGIA. Of the available 45 acres parcel of land, approximately
 21.8 acres of land has already been leased out to developers. The
 remaining land would be leased out during the current financial year.
 GMR Hyderabad International Airport Limited (GHIAL) envisages
 development of property around RGIA by creating a first of its kind
 destination for retail, entertainment and health care.
 
 We have been able to achieve robust growth during these challenging
 times. Despite global slowdown, which affected our market-sensitive
 assets, especially airports and highways, the revenue and profitability
 growth for the year are quite satisfactory.
 
 Successful merchant operations at GEL and restart of the Vemagiri power
 plant were key positive developments. The Gross Revenues for the year
 have increased by 66% from Rs. 2,698 Crore to Rs. 4,476 Crore, Net
 Revenues registered a growth of 75% from Rs. 2,295 Crore to Rs. 4,019
 Crore and Net profit has increased by 6% from Rs.263 Crore to Rs. 277
 Crore
 
 With more projects being commissioned in the present financial year,
 i.e. one highway and Sabiha Gokcen Istanbul airport, along with the
 year-round operations of Vemagiri power plant, we would witness even
 greater revenue and profitability contributions.
 
 However, the GEL plant may not be operational for a full year in view
 of its relocation and conversion into gas-fired plant to improve its
 future profitability.
 
 Our long term growth projections remain unaffected. After achieving
 financial closure for Kamalanga project, we are working relentlessly on
 other projects, especially the Chhattisgarh power project, expansion of
 VPGL, relocation & conversion of GEL plant and the development of
 Island Power project in Singapore.
 
 Organisation Development
 
 We firmly believe in the dictum that people resources drive the
 collective strength of its diverse business demands. A special emphasis
 is therefore given to nurturing and developing talent, so as to create
 a strong team of committed and empowered professionals who steer the
 Group’s diverse business needs.
 
 A comprehensive employee development programme supported with
 progressive policies which cover issues related to gender amity, talent
 mapping, employee well being has been formulated.  Senior Leadership
 Team (SLT), a forum of senior management executives and next in level
 to Group Holding Board, has been institutionalised to review and take
 decisions on critical issues.
 
 We have created a Central Procurement Department to centralize the
 procurement process and a Project Management Task Force to ensure
 effective project execution. We have also upgraded our technology
 platform to enhance the efficiency of our business and administrative
 operations. SAP has been implemented across the Group’s business
 locations. We have taken various initiatives to strengthen our
 governance standards which also include the formation of Corporate
 Governance Committee of Board.
 
 Corporate Social Responsibility
 
 Of particular relevance is the Group’s emphasis on inclusive growth
 where special attention is given to community which needs care such as
 the marginalised and the weaker sections of the society.
 
 Our sustained efforts in the area of ‘social entrepreneurship’ have won
 us several awards and accolades. These include the prestigious TERI CSR
 Award from the President of India on June 5, 2009, the World
 Environment Day and ORBIS Awards in Routes Airport conference in Kuala
 Lumpur.
 
 Acknowledgments
 
 express my sincere gratitude to our shareholders, investors, joint
 venture partners, lenders, banks, financial institutions, SEBI, NSE,
 BSE, RBI, NHAI, TIDCO, the Airport Authority of India, the Central &
 State Government and other regulatory authorities/agencies for
 providing continuous support. I wish to express my appreciation to my
 colleagues on the Board and our employees for their thought leadership,
 unalloyed dedication and unswerving commitment.
 
 express my sincere appreciation to the Board of Directors and the
 employees of the subsidiaries for their continued support. I am
 grateful to you for your cooperation and the trust that you have
 reposed in us
 
                                                    Best Regards,
                                                       G. M. Rao
                                              Executive Chairman